Benefits rolled out at the onset of the COVID-19 pandemic allowed vulnerable Canadians to stay healthy while maintaining an income, but business support was excessive, demonstrating the undue influence of corporate groups on public policy, economists say.
Nearly two and a half years ago, the federal government faced an unprecedented task of shutting down the economy to slow the rapid spread of COVID-19. That closure sparked a series of pandemic emergency benefits designed to soften the blow to workers and businesses, with the two most prominent programs being the Canada Emergency Response Benefit (CERB) and the Canada Emergency Wage Subsidy (CEWS).
A recent Statistics Canada analysis based on census data shows that two-thirds of Canadian adults received pandemic benefits in 2020, with those benefits absorbing income losses and reducing inequality.
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Earlier analysis by the Federal Bureau of Statistics also found that, as expected, use of the wage subsidy program correlated with a lower likelihood of closure and fewer staff cuts.
While there was little time in March 2020 to work out the benefits and fine-tune the details, economists are now assessing the successes and failures of these programs in retrospect.
Miles Corak, a New York University economics professor who has written analyzes of these programs, says any evaluation should take into account the uncertainty faced by people and governments at the time and the urgent need to keep people healthy.
That said, while the CERB was “terribly successful,” Corak said the Canada Emergency Wage Grant was a “huge failure.”
“The Canada Emergency Response Benefit got the money out the door quickly to keep people at home, and that’s what we wanted to do to save lives,” he said.
On the other hand, Corak said the CEWS “came late, it was misdirected and dramatically overinsured (companies).”
The CERB was quickly announced in March 2020 and $2,000 a month to Canadians who lost revenue due to the pandemic shutdown. Soon after, CEWS followed suit, which subsidized companies’ wages by 75 percent in hopes of encouraging companies to retain their workforce.
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Corak says that by the time the wage subsidy was introduced, many companies had already said goodbye to their employees.
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Another source of criticism of the wage subsidy program was that it subsidized wages for all employees of the affected companies, rather than just those whose jobs were in danger of being lost, making it particularly costly.
Jennifer Robson, an associate professor of political management at Carleton University, also pointed out that the wage subsidy program was unsuccessful. Robson said businesses that would otherwise have closed for reasons unrelated to the pandemic were left artificially afloat because of the wage subsidy.
“These were not companies that were going to be profitable again,” Robson said.
Data from Statistics Canada shows that the number of business closures rose dramatically in April 2020, but then fell sharply, bringing monthly closings to levels lower than before the pandemic.
About 31,000 businesses closed in August 2020, while nearly 40,000 were closed in February 2020.
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In retrospect, Corak said the wage subsidy program should have been smaller in scope and aimed at larger companies with specialized needs, where it would be important for companies to retain the same employees, such as the airline industry.
The Canadian Federation of Independent Business has said the wage subsidy has been “critical” for small business owners, noting in April this year that only two out of five members reported returning to normal sales.
Adrienne Vaupshas, the press secretary to Finance Minister Chrystia Freeland, said in a statement that the government’s focus at the start of the pandemic was to protect jobs and ensure a strong economic recovery.
“Today we have restored 114 percent of the jobs lost during the darkest months of the pandemic,” Vaupshas said.
Contrary to what some economists have characterized as excessively generous support for businesses, some low-income Canadians have faced social security benefits claim backs for collecting CERB. The Canada Revenue Agency also hopes to recover benefits paid to more than 400,000 Canadians whose eligibility has been questioned.
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In response, the anti-poverty group Campaign 2000 has called for an amnesty from the CERB.
Corak said that while it is reasonable to ask those who have fraudulently received benefits to repay them, companies should be held to the same standard.
“I would be concerned about the asymmetry in this response between individuals and companies,” Corak said.
The CFIB has called for more loan waivers for small businesses that have access to loans through the Canada Emergency Business Account. The federal government is already offering partial loan waivers if repayments are made by the end of 2023.
Robson said that when it comes to shaping public policy, corporate advocacy groups have well-equipped PR teams to represent their interests.
“There’s nothing like that for individual low-paid workers,” Robson said.
Corak noted that at the start of the pandemic, the emphasis was on the role of frontline workers, but over time this shifted to small businesses.
“I think the small business lobby has been very effective at informing individual MPs and pressuring the cabinet and government to respond in a way that many unseen and unheard of mothers, fathers, workers and families just don’t feel the same. had a voice,” Corak said. .
The danger of the wage subsidy program, Corak said, is that it sets a precedent for providing excessive subsidies to companies, thereby stifling innovation.
“We are almost moving towards a basic income for small businesses rather than a basic income for individuals,” he said.
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